A client asked me this week, “How are strata fees calculated?“. Here is the answer broken down:
Every strata has an operating budget as well as a contingency reserve fund. The operating budget is for all of the cost that happen at least once a year. Typical operating costs would be window washing, fire testing, and power washing of the parkade. Depending on the building there may be management fees, concierge services etc. The list can get pretty lengthy. Essentially any cost that is needed to maintain the building on a yearly plan.
Contingency Reserve Fund
The contingency reserve fund is the piggy bank for the building. A portion of every strata fee goes into the contingency reserve (also known as a CRF) for rainy days. When unexpected work needs to be done, this piggy bank acts as a way to offset the cost of the project. It could cover the project 100% or possibly only partially. If it’s only a partial CRF contribution the remaining portion will be via a special levy, or a one time charge to each home owner.
How are strata fees calculated?
The quick answer if through unit entitlement. When the building was made the developer will create the schedule of unit entitlement by looking at the total size of the development and breaking it down into strata lots. Each strata lot (home) has its own unit entitlement based on the total size of habitable area. A simple way of thinking about it is that a 1,000sqft home will spend 2x as much as a 500 sqft home. For more information on unit entitlement this is a great article:
When it comes to strata fees, nobody likes to pay them but they are necessary. You can either pay smaller strata fees, but have to take on a levy every time a project needs to happen or you can pay larger fees, which will build up the CRF to help save for the rainy day. Keep in mind, sometimes CRF’s may be low if a project was just completed. You cannot judge a building by the size of the CRF only. Take into account all work the that been done and what plans they have for the upcoming work.